DJ, one way to predict chop is using time of day. Around 11:30am EST I expect the ES to slow down on most days and start chopping. Do you use time of day in your trading ?
The mind of a trader
- Thread starter djmartin
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Yes I use time of day, but there's times when I'll trade through the lunch time chop. I was talking in terms of when it gets really choppy.
Most can recognize chop after the fact via hindsight chart analysis. Some can recognize chop as it is occurring in real-time. Yet, I haven't met anyone that can predict in advance exactly when chop will occur.
In contrast, all trading instruments have inactive trading periods. These durations of inactivity involves low volatility and/or low volume...its during these inactive trading periods where chop is likely to show its face...hence the time of day approach (time of day isn't an exact time...its just an area).
I myself do personal activities during certain time of day that's traditionally known to be inactive (low volatility and/or low volume) unless I'm expecting volatility to show up (e.g. 2pm es FOMC announcement). Yeah, sometimes a big price movement may occur unexpected when I was expecting low volatility but I'm ok with missing those trade opportunities.
The real problem with chop is when it shows up unexpected or when we're looking for trade opportunities. Another issue involving chop is chop that shows up after we open a trade position...when that happens...our experience and discipline becomes very important to help with the trade management of the open position.
In contrast, all trading instruments have inactive trading periods. These durations of inactivity involves low volatility and/or low volume...its during these inactive trading periods where chop is likely to show its face...hence the time of day approach (time of day isn't an exact time...its just an area).
I myself do personal activities during certain time of day that's traditionally known to be inactive (low volatility and/or low volume) unless I'm expecting volatility to show up (e.g. 2pm es FOMC announcement). Yeah, sometimes a big price movement may occur unexpected when I was expecting low volatility but I'm ok with missing those trade opportunities.
The real problem with chop is when it shows up unexpected or when we're looking for trade opportunities. Another issue involving chop is chop that shows up after we open a trade position...when that happens...our experience and discipline becomes very important to help with the trade management of the open position.
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